UPDATE 1-US regulator–prop trading not at core of crisis

* OCC head: Details of proprietary trading limits critical

* Says proprietary trading not a big contributor to crisis

* Says some version of prop trading necessary for clients
(Adds Dugan comments, details on proposal)

WASHINGTON, Feb 2 (BestGrowthStock) – The regulator of the largest
U.S. banks said on Tuesday that proprietary trading was not at
the root of the financial crisis and warned that excessive
limits could impair some of banks’ central functions.

“It’s one thing to talk about pure proprietary trading as a
business where the bank is in the business of taking bets on
particular markets for its own account. And I understand the
concern with that going forward, although this was not a big
source of the problems that led to the crisis,” Comptroller of
the Currency John Dugan told reporters on the sidelines of a
securitization conference.

President Barack Obama late last month proposed new limits
on big banks’ risk-taking, including curbs on commercial banks’
ability to engage in trading for their own profit instead of
for clients.

The proposals would also restrict the banks’ ability to
invest in, sponsor or own a hedge fund or private equity fund.

Details of the so-called “Volcker rule” have been scant,
and it is unclear if lawmakers will include a version of it in
Congress’ sweeping regulatory reform package. White House
economic adviser Paul Volcker was to testify on the proposal
later Tuesday before the Senate Banking Committee.

Dugan said the definition of proprietary trading will be
critical, because some version of such trading is critical to
the needs of financial firms’ clients.

“There are other types of principal activities that banks
engage in as part of their customer … activities, and there
is a recognition of that in the proposal. But how that’s
actually defined matters, because those activities are quite
central to what banks do in the money center business,” Dugan
said.

Stock Report

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick
and John Wallace)

UPDATE 1-US regulator–prop trading not at core of crisis